Here’s how I expect things to play out over the next few months. First-quarter earnings season is winding down, but it won’t be long before the market starts to focus on second-quarter earnings season. The time in between first- and second-quarter earnings, which I like to call “earnings pre-announcement season,” will start in June. Since investors are anticipating the upcoming earnings season, large-cap stocks usually do well in early summer. Then, we’ll get the bulk of second-quarter announcements in July. As for August, this is usually when the market catches its breath. This is when a lot of Wall Street professionals go on long holidays. So, trading volumes are light.
Regardless of whether we get a repeat of last year, or if this August is a bumpy ride, we should be in good shape as I expect the flight to quality dividend stocks to continue. The strong U.S. dollar is still suppressing sales for multi-national companies. So, most of S&P 500 has no sales growth and meager earnings growth. For this reason, more and more investors are resorting to stock-picking rather than sector bets. In addition to having excellent forecasted sales and earnings growth for the next few quarters, we are well positioned in dividend stocks. High-yield dividend stocks — especially conservative stocks like Altria Group Inc (NYSE:MO), Home Depot Inc (NYSE:HD) and Reynolds American, Inc. (NYSE:RAI) — act as a ballast when the market gets choppy.